RESTRICTED STOCK AWARDS

[JANIE GILMORE]

Client has E*TRADE 1099 for proceeds from stock sales. Statement from

Employer says restricted/non-qualified transactions were granted on 12-15-05.

Employers statement shows total value, then adjusted sales price to equal W-2 income.

Client no longer works for employer.

Would Schedule D entries be the total stock sale less the total value on employers statement? I don't know how the W-2 income $ figures into sales. I'm not sure what was included on his W-2

income from years past - looks like we have to report sale on Schedule D to match 1099 received from E*TRADE.

Thanks for your thoughts.

Janie

[kcjenkins]

You have the amount that was added to his W2, which is part of his basis. The other part is the amount that he had to pay to exercise the option. Usually simple to figure, because the combined amount should be equal to the FMV of the stock on the date of the exercise of the option. Might be a small amount for fees of the transaction.

Example: Stock was worth, on 12/15/05 a total of $2000. His option allowed him to purchase it for $500. His W-2 was then 'grossed up' to include the $1500 difference. So in fact, he paid $2000 for the stock, he just did not have to dig into his pocket for but $500, the company paid, but added it as income, the other $1500. His basis is $2000.

[JANIE GILMORE]

Thanks, KC, that information was helpful.

Janie

[BulldogTom]

In the title, Janie mentions an 83( election. Doesn't that mean the taxpayer took the income in the year of the vest at FMV on the date of the grant? Wouldn't this be a straight Capital Gains situation with the basis established in 2005?

Janie doesn't mention the election in the body of the post, but does in the title.

tom

Lodi, CA

[JANIE GILMORE]

Thanks, KC, that information was helpful.

Janie

You are correct, Tom. On the Statement of Taxable Income from employer, it states

"Unvested Exercises with 83(: On Vest. From 1/1/07 to 12/31/07. He was terminated

on 6-22-07.

It looks like this was reported as W-2 income:

Total Value $2,573.59,

Adjusted Sale price $1,195.20

Total W-2 Income $1,378.47.

E*TRADE FINANCIAL STATEMENT SHOWS $1,195.15 AS BOX 2 OF

FORM 1099B. Would his basis be $2,573.59?

This is from Spansion Inc., has anyone had experience with this?

Thanks for your help.

Janie

[BulldogTom]

<<Unvested Exercises with 83(: On Vest. From 1/1/07 to 12/31/07.>>

Don't quote me on this, but it looks like he was going to make the 83( election upon vesting, but he never made the vesting period. So the employer added 1378.47 to his W2 for the difference between the price he paid when excercising (before he vested) and the FMV on the excercise date. Looks like you have the basis correct. So if the sale price is 1195.20, he would have a loss.

Just my thoughts, use it at your own risk.

Tom

Lodi, CA

How do I make the faces go away?

[Gail in Virginia]

How do I make the faces go away?

Stop smoking the frikken bananas! :P

[Bart]

<<Unvested Exercises with 83(: On Vest. From 1/1/07 to 12/31/07.>>

How do I make the faces go away?

When you type a code section put a space between the "(" and the letter. So instead of 83( make it 83 ( b ).